Posted on 01/08/2009 11:10:20 AM PST by Lorianne
The long-held assumption that US assets - particularly government bonds - are a safe haven will soon be overturned as investors lose their patience with the world's biggest economy, according to Willem Buiter.
Professor Buiter, a former Monetary Policy Committee member who is now at the London School of Economics, said this increasing disenchantment would result in an exodus of foreign cash from the US.
The warning comes despite the dollar having strengthened significantly against other major currencies, including sterling and the euro, after hitting historic lows last year. It will reignite fears about the currency's prospects, as well as sparking fears about the sustainability of President-Elect Barack Obama's mooted plans for a Keynesian-style increase in public spending to pull the US out of recession.
Writing on his blog , Prof Buiter said: "There will, before long (my best guess is between two and five years from now) be a global dumping of US dollar assets, including US government assets. Old habits die hard. The US dollar and US Treasury bills and bonds are still viewed as a safe haven by many. But learning takes place."
(Excerpt) Read more at telegraph.co.uk ...
Why do I get the feeling that anti-American jerks the world over are trying their best to drag this country down?
Lots-o-bad stuff’s going to happen to us, but the crash of the dollar isn’t one of them.
“Why do I get the feeling that anti-American jerks the world over are trying their best to drag this country down?”
Because they are...It will be a huge mistake to thier economies as well if it happens. The domino effect will happen if teh dollar collapses.
But nobody overseas approaches the damage the Democrat Party is trying to do to our country.
I hate this talk as much as you do but there is the possibility that this may indeed happen. Who has 3 Trillion to spend on our bonds and even if they did, why buy them if your return is 0%. It sounds like a bad investment unless the world is going to hell and there is no more gold to be had. That’s the doomsday scenario, isn’t it?
Take away the BDS inspired sixth paragraph, and he makes a lot of good, and important points. Sometimes, your friends won’t tell you what you need to know. Sometimes, it takes a jerk.
its coming
This assumes other economies and currencies are less damaged.
You must believe his every word. He’s a former policymaker for the Bank of England, and British banks have been doing so well.
;-)
Looks like Willem isn’t meeting his goals for selling Euros.
I guess we know where this guy is coming from. Sounds like he has a political beef with the US as much as an economic complaint.
I'd like to ask this professor exactly where does he think that these foreign investments are going to go? If you liquidate your US investments, you must be buying something that you perceive to be better, right? As long as there is no single alternative, then the US slide (assuming he's right about that) will be a long one, but not unreversible.
unreversible = irreversible. Sheesh!
While I think one must be realistic and careful in how the finacial mess is handled, I think one must be equally careful regards propaganda and self-fulfilling prophecies.
It is very fashionable these days to talk down America but these jerks would do well to remember while it may be fun to bash the US, if indeed we do go down- the whole world is going with us.
The fall of the US $, which is coming sooner rather than later, will be encouraged by the Treasury Dept. and the Federal Reserve. The massive debt load requires cranking up the printing presses, inflating everything, while deflating the US $. Debt is then paid back with cheaper dollars.
The only other choice is for the US to default on it’s debt.
I think “Professor” Buiter is engaging in a little bit of ‘wishful thinking’. Need I remind him that it is the UK that has been failing to sell bonds to prop up all their socialist debt?, NOT the USA?
Spending $7 TRILLION in the past year is NOT going to help.
Stop whistling past the graveyard.
It seems more people would rather buy our bonds than those of the UK and Germany.
there is sound reasoning behind this. If anyones economy is going to improve first, it will be the USA's. It is far more likely that you will loose out buying euro's and sterling pounds and other currencies in the long haul as the world economy sours and then recovers.
Whether The prof likes it or not, it will be the American economy that drags the rest of the world to recovery, not the other way around.
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